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Highlights

Also on KPMG.com

Following last week’s Queen’s Speech and the signing of the deal with the DUP, the Conservatives are starting to move forward with the thorny issue of Brexit negotiations. This week, a year after the Brexit referendum, the UK Government published its policy paper covering the rights of EU nationals in the UK post-Brexit. The paper primarily covers the immigration issues but it also touches on social security benefits. Both immigration and social security will be heavily impacted by Brexit with businesses and employees looking for reassurance, clarity and certainty. Overall the package is complex and raises many questions and concerns.

Under the proposals, all EU nationals living in the UK before a specified date (as yet undetermined, but no earlier than 29 March 2017) and who have been lawfully resident for five years can apply for ‘settled status’ and be able to bring over spouses and children. Anyone living in the UK before the specified date but with less than five years residence can apply for temporary status and will be given an opportunity to build up a right to settled status. Those who come after the specified date will be given an opportunity to apply for ‘leave to remain’ under a new system, the details of which are not yet known.

Commenting on the proposals Punam Birly, a partner at KPMG UK, said: “After all the talk of a ‘big generous offer’ on EU nationals, expectations have been pretty high in the business community. So it’s a surprise that the paper recommends what is actually quite a complicated system.

“The paper requires every EU national, even those who already have permanent residence, to make an additional application. Although it is acknowledged that if someone already has permanent residence, the process for them to obtain settled status after Brexit will be simplified.

“Those employers who haven’t supported their EU national employees to date on the basis that immigration is a personal matter, may want to reassess that position. A person without some form of legal immigration status outside of any ‘grace period’, which could be up to two years after the withdrawal date, will be categorised as an illegal worker – that then impacts the employer as well as the individual.”

The policy paper does also touch on the social security implications of Brexit, focusing primarily on the benefits (such as health coverage). Under EU law, the social security contributions in respect of employees and the self-employed is restricted to one Member State with a set of rules to identify the contribution state. The administrative process is well known and clear to employers.

After Brexit, the UK may no longer be party to these arrangements, and certain EU jurisdictions are already assuming a cut-off date of 29 March 2019 on any relevant paperwork. Employers will be anxious about the social security contribution environment post-Brexit, which could become costly, frustrating and time consuming for business unless an agreement (or even a transitional period) is reached between the UK and the EU on this point.

For a more detailed analysis of the potential consequences for social security, please refer to our previous article exploring this.